VICTORIA — Politicians should stop bossing around the independent regulator that oversees B.C. Hydro so the province can get a true sense of what electricity rates customers need to pay, says the auditor general.

Auditor General Carol Bellringer on Wednesday outlined the concerns about Hydro that caused her to place a qualification on the B.C. government’s year-end financial report this week.

The most significant issue is $5.5 billion in expenses Hydro has pushed into deferral accounts to be paid by ratepayers in future years. That’s a common practice among North American utilities to prevent unexpected rate hikes, said Bellringer, but to be acceptable under accounting rules it has to be accompanied by oversight from an independent regulator, in this case the B.C. Utilities Commission.

Instead of allowing unfettered oversight, the previous Liberal government used cabinet orders since 2012 to override the utilities commission and set Hydro’s rates directly, said Bellringer.

The former Liberal government had promised voters affordable Hydro rates and used cabinet orders to keep them low rather than let the independent commission set what Hydro needed to charge. The Liberals pushed enough of Hydro’s costs into deferral accounts so the Crown corporation looked profitable enough to return billions in dividends back to the provincial budget. In reality, Hydro was so cash-strapped that it had to borrow more than half the $6 billion in dividends it gave to government.

Bellringer said the constant government interference is “not acceptable” if the province wants to continue to allow Hydro to use deferral accounts.

The Liberals largely ignored concerns raised by successive auditors general on the issue. NDP Finance Minister Carole James said this week that her government paid $950 million of Hydro’s deferral accounts in a step toward addressing Bellringer’s concerns. The move will not result in any rate increases, she said.

“This doesn’t fix the problem that was left to us, but it is a significant step that we have taken to show that we recognize that it’s a problem and that we aren’t ignoring it,” James said Tuesday.

However, there is still almost $4.5 billion in 29 outstanding Hydro deferral accounts. Some will be repaid using a surcharge already levied on Hydro bills, but others could require future rate hikes.

The government could pay off all of Hydro’s deferral accounts, but it would likely be forced to run a massive deficit in the current 2018-19 fiscal year to do so. Another option would be for the NDP government to allow the utilities commission to conduct an in-depth review of the deferral accounts and set rates to recover them free of cabinet directives.

But turning over complete control of Hydro rates to the independent commission could also put the Horgan government in a bind. The NDP, much like the Liberals, promised voters it would keep Hydro rates low. It has already clashed with the commission over an election promise to freeze rates that the commission rejected last year.

The years of government interference have left Hydro rates unbalanced and “residents are underpaying and commercial customers are overpaying,” according to the report by Bellringer on Wednesday.

James sidestepped questions this week about whether the NDP would allow an independent commission free rein to raise rates in the future if it deemed that necessary.

“I’m not going to speculate on what BCUC may or may not decide, or what Hydro is going to go forward with,” James said on Tuesday. “They’re going to go through their process. They’re going to take a look at affordability for ratepayers. That’s part of our mandate and it’s part of our requirement for Hydro, is to look at both affordability for ratepayers as well as sustainability of Hydro. So taking both those into account, I’m confident that that work will be done.”

Bellringer’s report also highlighted another accounting concern over how the government records financial transfers from other governments over several years. All told, Bellringer estimates government overstated its financial assets by $4.5 billion, overstated its liabilities by $5.3 billion and should have reported a surplus for the 2017-18 fiscal year ending March 31 of $1.1 billion.

James and the NDP government disagree with the accounting interpretation, and insist the $301-million surplus posted this week for the 2017-18 fiscal year remains accurate.

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